BlackRock reinforces itself in private markets: global capabilities and alliances at the local level

BlackRock reinforces itself in private markets: global capabilities and alliances at the local level
BlackRock reinforces itself in private markets: global capabilities and alliances at the local level

At its annual private markets event in Madrid, BlackRock shared with its clients the main trends and opportunities they see in this industry. They did it with the help of experts from the entity, but also partners and investors. The manager had a lot to tell after 12 months in which they have been very active in strengthening capabilities in private markets, both globally and locally.

Last January it announced the purchase of the infrastructure manager GIP (Global Infrastructure Partners), which will position BlackRock as the second manager, by volume of assets managed, in the private market infra world behind Macquarie. Why GIP?, he asked. Larry Fink in its latest annual letter to investors: “although BlackRock’s infrastructure business had grown rapidly in recent years. But to meet the pace of demand, we realized we needed to grow even faster,” he says.

At the local level, they have signed their own real estate team led by Adolfo Favieresclosed a distribution agreement for their first FCR with Bestinver. In addition, BlackRock collaborates with some of the main general partners with a local presence such as Fremman Capital.

This allows BlackRock to position itself in the private equity segment with capabilities and industrial knowledge. In exchange, it offers its support in terms of due diligence, technology and access to information. “The entry of BlackRock as an investor has given us a top-level seal of quality,” he stated. Jaime Fernández-Rubiespartner at Fremman Capital.

Growth of private markets

These movements demonstrate BlackRock’s commitment to a $13 trillion market that could grow by 50% in five years, driven by two levers: the flexibility of access and the structural growth of the market. A commitment that the manager materializes in four axes that generate opportunities in the different segments: decarbonization of the economy (infrastructure), digital disruption (private equity), demographic dynamics (real estate) and transformation of financial activity (private credit).

“No one doubts the growth that private markets are going to have,” he noted. Luis Megias, Country Head of BlackRock in Iberia, “how and at what speed is the big question”, especially when we talk about making these markets more accessible to the individual client. A market that increases and evolves, something that is observed in the approach that distributors and investors have towards these strategies: from product placement or recommendation to portfolio construction.

Evolution of the role of investors

From the institutional point of view, Conchi Melero, Alternative Portolio Manager at Fonditel, highlights both the increase in exposure to the asset and the greater knowledge on the part of investors. Under a global approach, BlackRock, highlights that the preferences in this customer segment are moving towards assets that cover their needs for protection against inflation and search for yield, and this is mainly materialized in entries into direct lending or infrastructure. In other strategies, such as private equity, the bet is directed towards secondaries, given the greater sophistication of investors.

The great revolution is being seen in the wealth segment, the epicenter of a flexibility process that could channel between one and two trillion dollars into this part of the business throughout the entire value chain, including managers, platforms, distributors, etc However, “a lot of resources and efforts are needed to turn this possibility into a reality,” he points out. Fabio Ostahead of BlackRock’s Wealth Alternatives team in EMEA.

Osta anticipates the importance that the retail customer experience will have when investing in private markets, something new in the whole of an industry whose operations have been very manual. This is an aspect that since CaixaBank keep in mind, making its private banking the firm with the highest business volume in these markets, which represent an aggregate average of 5% in client allocation. For Alvaro Villanuevadirector of Alternative Investments, there is only one way to invest his clients’ money: “building a portfolio with a long-term vision.”

What do investors look for in a private markets manager?

Melero points out that the selection process is based on three variables: the manager’s track record, profitability and team experience. From there the entire due diligence process will start, which includes the most exhaustive analysis at a legal level, structuring, concentration limits, etc. According to Villanueva, there are not many managers with large teams prepared to face more complex market environments like the current one. In that sense, he is incisive in his meetings with managers: “I like to ask about the last operation knowing what the environment is like. “Don’t tell me any investment, but the last one you have made.”

“Everything to do”

The great unknown in the development of the wealth segment is not so much how to give access to the individual investor, but rather what the winning formula will be. While developing the Eltif offer, BlackRock has opted for the local vehicle with Bestinver, one of the great alliances in the local industry in this field. It is about betting, in parallel on different business models, structuring and distribution of the vehicle in an industry that, as Luis Megías states, “everything remains to be done.”

 
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